ZEELAND, Mich. — Gentex Corp. has revised its financial guidance for the fourth quarter of 2008. The company also announced that it is "right-sizing" its workforce on a companywide basis in an effort to match its customers’ requirements for auto-dimming mirrors and fire protection products.
Gentex Senior Vice President Enoch Jen said that global light vehicle production has continued to decline since the company provided guidance for the fourth quarter of 2008 in a news release dated Oct. 21. At that time, based on CSM Worldwide’s mid-October automotive light vehicle production forecast, the company estimated that revenues in the fourth quarter of 2008 would decline by approximately 15 percent compared with the fourth quarter of 2007. Jen also stated at that time that it seemed that the automotive environment would get worse before it gets better, and that the company believed there was more downside than upside to that forecast. Since that date and according to CSM’s final November 2008 forecast, light vehicle production in North America for the fourth quarter of 2008 has declined by another two percent (3 million light vehicle units in October compared with 2.9 million in the November forecast), Europe has declined by another 13 percent (5 million light vehicle units in October compared with 4.3 million in the November forecast) and Japan and Korea have declined by another two percent (3.8 million light vehicle units in October compared with 3.7 million in the November forecast).
"In response to the steep declines in vehicle sales and high inventory levels during October and November, many automakers had extended shutdowns over the Thanksgiving holiday and are also planning for extended shutdowns over the Christmas holiday," said Jen. "Some automakers are even planning to shut down for the entire month of December, with others adding additional weeks into January of 2009.
"In addition, it’s obvious, given the vehicle production information above, that the production environment in Europe, Japan and Korea also are worsening. Given those changes since we provided our revenue guidance on October 21, we now currently expect that our revenues will decline by more than 25 percent in the fourth quarter of 2008 compared with the fourth quarter last year," said Jen.
Jen said that the company has been responding to the weakness in the automotive market throughout the year. He said that the company previously had eliminated its entire contract workforce, which was followed by the elimination of a third shift, voluntary layoffs and shutdowns the week of the Thanksgiving holiday. In addition, the company will have extended shutdowns to match the company’s customers’ planned shutdowns over the Christmas and New Year holidays.
"Unfortunately, these actions are not enough, as automotive production schedules have continued to decline and are now forecasted to continue on this downward slope through most of calendar year 2009," stated Jen. "To adjust for this protracted period of production declines, effective immediately the company has permanently laid off approximately 350-400 hourly and salaried workers, which will help to reduce the company’s overhead and operating expenses to a level that is more in line with current and planned sales and production levels in the automotive and fire protection industries.
"We are saddened that we’ve had to resort to layoffs, but the three major automotive markets in the world are all now in a recession. We have responded during the year, trying to react rapidly to match our customers’ production plans, but it has reached the point where we have no choice and have to do more. The majority of the hourly and salaried layoffs will impact the company’s overhead expenses. However, some of the changes also include taking steps to streamline and integrate our engineering, research and development functions in an effort to gain higher productivity, which should help to slow down the future rate of increase in our operating expenses."
Jen said that the salaried workforce reductions will result in a decrease of approximately $6 million in the company’s overhead and operating expenses on an annualized basis. Approximately 60 percent of that $6 million expense reduction will impact the company’s overhead expenses, and the other 40 percent will impact the company’s operating expenses, primarily in the engineering, research and development areas.
"We believe that this layoff will align our resources with the production requirements of our customers in the coming year, without risking the company’s future product development efforts that are important to the long-term success of the company.
"As managers of our shareholders’ investment in the company, we believe that this is the right decision for Gentex in the near and long term. The company remains in a very strong financial position, as we continue to have no debt and sufficient cash to weather this storm," Jen concluded.
CSM Worldwide’s forecast for light vehicle production in calendar year 2009 continues to worsen on a monthly basis, according to Gentex. Based on its final November light vehicle production forecast, for calendar year 2009, CSM is now estimating that light vehicle production will be 11.3 million units in the North America versus 12.8 million estimated units in calendar year 2008 (down 12 percent year-over year), 18.8 million units in Europe versus 20.9 million estimated units in calendar year 2008 (down ten percent year-over-year) and 15.0 million units in the Japan and Korea versus 14.7 million estimated units in calendar year 2008 (up two percent year-over-year). The first time that CSM now expects to see a year-over-year increase in light vehicle production for the North American market is in the first quarter of 2010. CSM currently expects to see a year-over-year increase in European light vehicle production in the fourth quarter of 2009 and in the third quarter of 2009 for Japan and Korea.
Gentex will announce its final fourth quarter financial results on Jan. 29, 2009, and currently intends to provide top-line revenue guidance for the first quarter of 2009 and calendar year 2009 at that time.